The authors think that wearables are “more than a passing fad,” and that they are significantly more powerful than such devices in past years, although obstacles persist in functionality that limit their appeal:

Over the past 12 months, the term “wearable tech” has grown into the biggest buzzword in consumer electronics [...] Few product lines have been produced, and even fewer have been marketed to a large audience. Adoption remains in question, and therefore the impact of the technology upon various industries is unclear [...] Body-mounted electronics are not new, as the functionality of current wearable technology aimed at the healthy or athletic consumer already exists, albeit in disparate forms [...] Microsoft’s SPOT technology sought to introduce data into everyday products, including watches, starting in 2003. Virtual Reality goggles and Casio calculator watches are famous novelties of the 1980s and 90s. However, the limited functionality, intrusive design and steep prices of these devices restricted their appeal to niche markets. Advancing technology – such as shrinking electronics and the Internet – has created greater utility and flexibility of design; more sensors (e.g., gyroscopes and heartbeat sensors) and more connectivity options (e.g., WiFi and Bluetooth) are now available. As a result, compromises are far fewer than previous iterations of wearable tech. However, there remain several near-term drawbacks which likely prevent this nascent product trend from becoming more appealing to the masses; pricing remains relatively high (most products over $100), most products require an interface with a smartphone to fully function and some carry the stigma of invasiveness.

A lot of this is still “nerd tech,” not really fashionable, they opine:

Google Glass wearers are treated as a spectacle, as the novelty of the item more than offsets any immediate perception of its aesthetic appeal or utility and, while the company is attempting to foster crossover appeal (notably with a runway appearance at Diane Von Furstenburg’s Spring 2013 fashion show last September), the item is still considered more “nerd” than “nerd-chic.” Similarly, smartwatches typically place function before form, with bulky industrial styles and simple rubber or fabric bands. Conversely, performance monitors, long used by serious athletes, are for the most part, hidden or worn temporarily, while the largest adoption of the trend, in our view, has been the wearable activity trackers as bracelet-type accessories that exclude screens. We attribute their somewhat minimal and unobtrusive designs as a reason for their success.

Data gathered on eBay (EBAY) show fitness trackers such as the Nike (NKE) “FuelBand” and the Jawbone “UP” show “a clear uptrend in consumer interest since November 2011, with acceleration after January 2013. We expect that Nike’s FuelBand, FitBit and Jawbone UP will remain top sellers and we’ve recently noted stock-outs of Jawbone UP at several consumer electronics retailers in August.”

Smartwatches, including Samsung Electronics‘s (005930KS) recently unveiled “Galaxy Gear,” are going to have a hard time being much more than an appendage to a smartphone:

Limited screen size, as well as limited battery life brought on by the small form factor, should restrict the number of useful applications for the devices, likely holding down any attempt to create an ecosystem around the products. We expect smartwatches will be relegated to smartphone and tablet accessories, which begs the question: how much are consumers willing to pay for a dashboard that is marginally more accessible than the smartphone that it requires? Bluetooth headsets and docking stations are commonplace, but most models are available for under $100. As mentioned earlier, watch wearers who already spend over $100 for time pieces will be more likely to buy, so long as the items are fashionably acceptable. Items priced like the Gear may have difficulty finding traction unless cellular service providers are willing to subsidize a portion of costs, as they do with most smartphones.

Smart eyeglasses, like Google Glass, may have more possibilities, as they offer a different experience than that on smartphones, the authors write. But the stigma of “creepiness” will linger because of things such as the devices’ ability to surreptitiously record video.

Near-field communications (NFC) transmitters – tiny chips that communicate over very short distances – have become common features built into mobile devices; the technology is inexpensive, extremely compact and uses very little power (passive NFC units use no power at all). In recent months, several manufacturers – including China’s GEAK – have introduced plans to market wearable products – namely rings – that incorporate NFC chips for the purpose of identification. At this time, devices focus on identification for security purposes: the rings can be used to unlock smartphones or NFC-enabled door locks. However, the use case could be broadened to incorporate payment technology or data storage. Broad adoption will likely depend on the willingness of organizations to incorporate NFC sensors into their infrastructures.

The authors conclude that before society arrives at a scenario where the devices are pervasive, they will have to achieve greater style and chic, and battery life will have to improve:

Longer-term, we believe that wearable technology will likely evolve into the broader apparel market before perhaps being directly inserted into the body in a ominous scenario reminiscent of the movie Minority Report – embedded identification chips in pets and adhesive circuits directly applied to skin are two examples of this technology already in existence or development. The majority of today’s current wearable technology devices are focused on existing accessory form factors such as watches, bracelets or eyewear, while apparel innovation has largely been focused on textiles laminated with innovative materials – such as UA’s Infrared – or “smart fabrics” embedded with sensors. This idea is not particularly new as a sports bra for Polar with the first textile heart rate sensor was designed in the late 1990s by Clothing+ and went commercial in 2002 – the company is currently working on compression pants also laminated with sensors. One item of note is Zegna’s Icon jacket, which incorporates Bluetooth capability for connectivity to devices, a joystick-like controller on the sleeve and an embedded microphone in its collar. We can certainly envision a scenario in the not-too-distant future where more tech devices are embedded within our everyday apparel – actual chips on your shoulders – though prototypes to date have largely been conceptual items such as the “Twitter Dress” designed by tech-fashion brand Cute Circuit or Google’s Smart Shoes. For the near-term, we believe that fashionable design is crucial to the overall success of any wearable technology. Yet another underestimated factor is battery life and its restraint on power-consuming features like data connectivity and vibrant displays. Battery technology has lagged other areas of electronic development; increases in time between charges have been achieved mostly by reducing the power consumption of semiconductors, not through increased battery capacity. Small devices must inherently make use of small batteries, and this limits the total power in a full charge. Adding an extra level of maintenance to a device will impede its adoption, regardless of innovative features.

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There are 3 comments

OCTOBER 2, 2013 5:41 P.M.

Anonymous wrote:

Google had some excitement going with its Glass. But that excitement has petered out. Nothing. No money machine as a driver. Just a new girlfriend. As for Samsung's gear watch. They're a joke. Or do you need more proof.

Re Apple and betting against them. I have to wonder whether past examples of companies in similar circumstances are no longer valid as models. Until America there was nothing similar boys. Nor after.

OCTOBER 2, 2013 9:03 P.M.

John Riley wrote:

Wearable Technology will be adopted in considerable time but it will quicker than its predecessors, it took 12 years for desktop PC sector to mature and laptop industry matured in just 10 years. If the trend continues then wearable technology will be adopted quicker and it will yield great returns in the from of profit to the innovators. I was able to build my insight through this very well written report.

Wearable developers, technologists, designers, telecom and hardware providers are set to attend Wearable Computing Conference 2013 in New York next November 7, the biggest forum on wearable technologies on the East Coast.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.